Reporting: weighted average price source
cedayiv at gmail.com
Mon Jul 7 12:46:43 EDT 2008
On Mon, Jul 7, 2008 at 9:42 AM, Charles Day <cedayiv at gmail.com> wrote:
> On Mon, Jul 7, 2008 at 8:53 AM, Derek Atkins <warlord at mit.edu> wrote:
>> "David G. Hamblen" <dhamblen at roadrunner.com> writes:
>> > A few years back (v1.8x), I had problems with these absolute values, and
>> > patched report-utilities.scm,and commodity-utilites.scm so that the
>> > sheet would balance. In addition to completely removing all the
>> > I also had to do something about the division by zero in
>> > when there was a zero share balance. I'm using the "Nearest in Time"
>> and the
>> > problem went away in the 2.x updates. If anyone's interested, I can dig
>> > my old postings.
>> > Anyway, I vote for getting rid of absolute values in bookkeeping.
>> It's not a question of book keeping. It's a question of computing
>> the share price. GnuCash stores buys as a positive and sells as
>> a negative. As Christian pointed out before, if you buy x shares
>> for $y and then later SELL x shares for $y then a non-abs weighted
>> average gives you a price of 0/share! Obviously this is wrong.
>> The weighted average should be $(y/x) per share. But without
>> the ABS you get:
>> y * x + (-y)*x xy -xy 0
>> -------------- == ------ == --- = 0
>> x + x 2x 2x
>> When you use abs() here you get the right answer.
>> Of course, then you need to make sure you re-apply the negative
>> for sales.
>> So it's not a question of absolute values in bookkeeping. It's
>> a question of absolute values in computing share prices. Not
>> the same thing.
> I agree with Derek. That is, the "weighted average" price source is not
> intended to compute the cost of your holdings, but rather to compute the
> volume-weighted average price of all buys AND sells. So it needs to keep
> using the absolute value. However, it does need to be changed: it should
> ignore exchanges with a zero "amount" in the split.
> So I think we need to add a new price source of "Cost" which computes
> without absolute value and does include zero "amount" splits. That's where
> taking a look at David's code might come in handy (though implementing this
> seems like a pretty simple job: copy existing weighted average function, get
> rid of absolute value, add report option).
> Whether to even keep the "weighted average" price source is a question
> worth asking; I don't think it is a useful way to revalue current holdings.
> Historical volumes don't seem relevant. Even if the volume weighting was
> removed, the formula also weights quotes that are clustered within a small
> period of time more heavily than quotes that are spread apart. In other
> words, if I have 30 quotes from this month and one quote from last year, the
> recent quotes practically drown out the quote from last year. If we want to
> aim for a historical price average then using something like linear
> regression seems like a better way to go. Could even add some time factors,
> like getting the midpoint of the portion of the line covering the last 30,
> 60, 90 days, whatever. But now I am brainstorming new price sources.
A clarification: Where I have said "quote" here, please read "price". I
didn't mean to imply use of downloaded quotes or the price DB. -Charles
> I do think a volume-weighted average price can be useful; it's just more
> appropriate for measuring your personal trading performance. Maybe there
> should be a performance report designed around that.
>> Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
>> Member, MIT Student Information Processing Board (SIPB)
>> URL: http://web.mit.edu/warlord/ PP-ASEL-IA N1NWH
>> warlord at MIT.EDU PGP key available
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